Equity markets inch higher as positive sentiment prevails

Global and Philippine Market Update
Feb. 29 to March 6, 2024

Global Markets

Global Stocks trend higher on positive economic data.

• Federal Reserve (Fed) Jerome Powell stated that rate cuts would depend on economic conditions, emphasizing a focus on maximum employment and price stability. He indicated that rate reductions might occur later in the year citing confidence in a lack of immediate recession risks and a steady decline in inflation, given low unemployment and continued broad growth. 

• US private sector job growth improved in February, adding 140,000 positions, slightly below the Dow Jones estimate of 150,000. The leisure and hospitality sector experienced the most gains followed by construction. Additionally, annual pay for those remaining in their jobs increased by 5.1%, marking the smallest increase since August 2021 which indicates a potential easing of inflation.

• Wu Qing, Chairman of the China Securities Regulatory Commission, outlined crucial measures aimed at improving the quality of listed companies. These actions involve encouraging listed companies to bolster stability and ensure dividends are distributed promptly and predictably. He aims to enhance investor protections, fostering confidence in the market and attract long-term investors. The move is in response to recent intense market fluctuations which led Beijing to implement stricter regulatory controls. 

Philippine Stocks

Philippine Stocks were rangebound awaiting new catalyst.

• The Philippine equity market is poised for a rebound this year, driven by expectations of interest cuts and easing inflation. PSE President Ramon S. Monzon sees favorable conditions for the PSE index (PSEi) to reach targets set by banks and brokerages, ranging from 7,500 to 8,300, after two consecutive years of negative returns. 

• April Lee-Tan, Chief Equity Strategist at COL Financial, suggests that it’s easy to see a bull case scenario for the stock market due to favorable conditions, including the peak of inflation and interest rates not only in the Philippines but globally. However, risks remain, with the contagion risk from the United States being a major concern, particularly if the US economy experiences a recession or a bear market.

Philippine Bonds

Philippine Bond yields stayed elevated as inflation picked up. 

• The Bureau of Treasury (BTr) fully awarded a reissued treasury bond with a remaining life of six years and 10 months at an average rate of 6.27%. The rate was higher than the 6.094%% observed during its initial offer last January 16. The higher rate was awarded after inflation increased in February.

• February saw inflation inched up to 3.4%, driven by increases in food prices and utility costs. Rice prices surged 23.7%, the fastest level in 15 years, contributing to an increase in overall food inflation to 4.6% from 3.5%, as reported by National Statistician Dennis Mapa. This is the first increase in inflation after four consecutive months.

• Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. considers raising rates unlikely despite the faster inflation observed in February. Additionally, he expressed uncertainty about the timing of rate cuts, remaining cautious about potential “second-round effects” that might pose challenges in keeping inflation under control.

FWD Guidance: Uncertainty leads to downside risks, but diversification and a long-term investment horizon still provide the best chance for financial success.

Sources: (1) https://www.reuters.com/markets/us/feds-powell-set-election-year-stage-with-testimony-rate-cuts-inflation-2024-03-06/ (2) https://www.cnbc.com/2024/03/06/adp-jobs-report-february-2024.html (3) https://www.cnbc.com/2024/03/06/china-securities-stocks-csrc-npc-2024.html (4) https://www.bworldonline.com/top-stories/2024/02/29/578497/psei-poised-for-rebound-this-year/ (5) https://business.inquirer.net/448842/bsp-more-rate-hikes-unlikely (6) https://www.bworldonline.com/banking-finance/2024/03/06/579671/govt-fully-awards-reissued-seven-year-bonds/ (7) https://www.rappler.com/business/philippines-inflation-rate-february-2024/

Disclaimer: The purpose of this article is to inform and should not be taken as an advice or offer to purchase securities. Seek professional advice before making a decision based on this presentation. Information given does not represent the views of FWD and its agents and employees.